Question

1. An airline is evaluating two projects that are mutually exclusive with initial investments and cash flows as follows:

Year	Cash Flows (A)	Cash Flows (B)
0 1 2 3 4 5	-$18,500 4,500 4,500 4,500 4,500 4,000	-$16,490 4,000 4,000 4,000 4,000 4,000

According to the above table, what is the IRR of project (A)?

A) 3%

B) 6%

C) 9%

D) None of the above.

Answer 1

A YEAR 0 1 2 3 Cash flows -$18,500 $4,500 $4,500 $4,500 $4,500 $4,000 6% IRR IRR(B3:38)